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CenturyTel completes purchase of Embarq

Wednesday, July 1, 2009 | 8:17 p.m. CDT

KANSAS CITY — With the completion of its purchase of Embarq Corp. on Wednesday, CenturyTel Inc. becomes one of the largest traditional telephone companies in the country.

But the combined company, to be renamed CenturyLink, will have to answer concerns about how quickly it can expand high-speed Internet service and survive the continued exodus of traditional telephone customers.

"Our approach is really to focus on being the premiere broadband service provider in our markets," said Glen Post III, the combined company's chief executive officer. "Broadband is where the future is in this business."

Monroe, La.-based CenturyTel announced in October it was buying the much larger Embarq for $5.8 billion in stock and taking on $5.8 billion of the Overland Park, Kan.-based company's debt. The move comes as the traditional telephone industry deals with a steady exodus of customers switching to wireless and Internet phone services.

Frontier Communications Corp. announced in May it would buy part of Verizon Communications Inc.'s wireline business for $5.3 billion in stock.

Combined, CenturyLink has about 7.5 million telephone lines in 33 states, more than 2.1 million broadband customers and more than 440,000 video subscribers. Based on the separate companies' most recent results, CenturyLink said it would have had $8 billion in revenue last fiscal year.

Post said the company plans to expand its wired broadband, or high-speed, Internet service to 90 percent of its eligible customers over the next three years. The remaining 10 percent, who live in rural areas determined too remote to economically link with landline service, could initially be served through satellite-based or wireless broadband.

But Post said CenturyLink may also get help speeding along its plans by applying for part of the $7.2 billion in federal stimulus money being offered to expand broadband availability.

"We're going to be looking closely at the stimulus package that's being developed and are very hopeful that we're going to be able to participate in that," Post said, adding that the money would go to increasing download speeds and paying to run broadband lines into rural areas where it's considered too expensive to build now.

Some have criticized CenturyLink's broadband plans as being as or less aggressive than if CenturyTel and Embarq had remained apart. But Post said the combination will definitely be a catalyst for broadband.

"The larger company obviously gives us more scale, which will enable us to roll out more services more quickly," he said.

He declined to say how much extra the company planned to invest in broadband in the coming years but said "we have the financial strength to do this without any issues at all."

The company has identified $400 million in cost savings from the acquisition by 2011, which Post said will come largely from eliminating duplication within its technical networks.

Under the deal, Embarq shareholders received 1.37 CenturyTel shares for each share of Embarq they owned.

Embarq, which spun off wireless carrier Sprint Nextel Corp. in 2006, served rural areas and smaller cities in 18 states as well as Las Vegas. CenturyTel's service areas are mainly in the South and Midwest, with some service in Colorado and the Northwest.

CenturyTel shares fell 9 cents to $30.85 in after-hours trading, following a gain of 24 cents to close at $30.94 in the regular session Wednesday.

 

 

 


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